It's been called the "water well gambit" -- the 11th-hour drilling of a private water well on the very spot a company has staked for commercial gas production.
Sometimes the tactic used by landowners as a way to stop, or at least delay, gas development works. Sometimes it doesn't.
Pittsburgh-based EQT Corp. is hoping it's the latter case as the company battles landowners for the bounty that's found underneath their properties.
The oil and gas company is involved in two lawsuits with landowners in West Virginia who, the company insists, acted with "unclean hands" by sinking water wells in an area where EQT wanted to tap the Marcellus Shale.
The blocking strategy has been used in West Virginia for years, according to David McMahon, a West Virginia attorney who co-runs a website counseling landowners on matters such as how to stop unwanted gas activity.
In a battle with oil and gas companies, "You don't have much on your side," he said.
"They've got the money, they've got the experience, they've got the lawyers, and the element of surprise. And so one of the ways you can stand up for your rights, to have some reasonable use of your surface, is to drill a water well," he said. "Some gas companies may think that's not fair. We don't think fairness has ever been the standard on what gas companies can do to surface owners."
Mr. McMahon's website, the West Virginia Surface Owners' Rights Organization, offers tip sheets with titles such as, "You probably can refuse (or maybe block) a horizontal well on your land."
Frequently, the landowners who take his advice don't own the mineral rights under their property. So-called severed estates -- where land, coal, and oil and gas may each belong to different entities -- are common in Western Pennsylvania and in West Virginia. In both states, the interests of the surface owners are subservient to those of the mineral owners, which means gas companies can use land they don't own in order to extract the gas below it.
But landowners who don't stand to benefit financially from gas development also don't want the land damage and nuisance that come along with it.
Some may not be entirely opposed to gas wells but they want more control over the placement of a 10-acre well pad that roars for months during construction, drilling and fracking operations.
Such is the case in EQT's most recent lawsuit, involving a 937-acre farm in West Union, W.Va., where the company wants to drill five Marcellus wells. The landowners -- three related families -- want to build a log cabin on a hill there. This summer, they drilled two water wells to serve the planned cabin.
In a lawsuit filed this month in the U.S. District Court of the Northern District of West Virginia, EQT claimed the families drilled the water wells "solely for the purpose of attempting to prevent EQT from rightfully drilling gas wells" there, since West Virginia law prohibits gas wells within 250 feet of existing water wells.
EQT says the landowners acted with "malice aforethought" and asked the court to order the water wells be plugged, to direct the landowners not to build a cabin there, and to award the company punitive damages.
EQT spokeswoman Linda Robertson said the company wouldn't comment on the lawsuit but offered a general statement that said, "From time to time, natural gas producers encounter situations, such as this, where landowners do not own the oil and gas rights beneath their property.
"Regrettably, we must rely on the court to provide a decision in this particular matter."
Legal result has been mixed
EQT has been through this before and may be emboldened by its experience with a similar problem last year.
Another set of West Virginia landowners drilled a water well within days of the start of the company's operations on their land, and EQT sued using nearly identical language to its current complaint.
"They snuck in there and drilled a water well solely to keep us from drilling our gas well, period. That's the only reason they drilled it," EQT's attorney David Hendrickson told a federal judge during a hearing April 2012. Meanwhile, the company had already shelled out more than $280,000 in preparation to drill.
William Thurman, a West Virginia lawyer who represented the defendants at the time, was having none of it.
First, landowners don't sneak onto their own properties, he argued. And second, "The reason for the lawful well is not relevant." In other words, the motive doesn't matter.
It's an argument he made successfully in a 2010 case when landowners drilled several water wells on empty property to prevent Diversified Resources, a West Virginia-based company, from drilling a Marcellus well on their land. The state court judge in that case ruled it makes no difference that the landowners intentionally tried to block gas development. They drilled a legal water well, and it would stand.
But the federal court judge handling EQT's case last year didn't see it that way. The defendants were ordered to plug their water well so that EQT could proceed with its gas well.
Mr. Thurman said he's handled more than half a dozen such cases where landowners drilled water wells or erected structures within 200 feet of a proposed gas well to stop the drilling.
Some clients came to him having gotten the idea from Mr. Mahon's website. Some came in search of a solution and Mr. Thurman supplied the idea.
These days, though, he said drilling water wells to stop gas development "probably won't work," because of a 2011 West Virginia law that spells out exactly when existing features must be in place before drilling begins. A similar provision is included in Pennsyvlania's Act 13 legislation.
Only water wells and structures in place at the time that the gas company submits its permit application to the Department of Environmental Protection and the landowner count toward the setbacks.
The Pennsylvania experience
In 2011, the Baron Group, a Pittsburgh-based oil and gas company, applied for permits to drill wells on a 136-acre parcel of land in South Huntingdon, Westmoreland County.
The landowner, who doesn't own the mineral rights below the land, objected to the permit.
When the gas company revealed the location of the proposed well, the landowner moved a trailer into the area. The company adapted and got a permit for another location, outside of the required setback for the trailer.
But just before gas drilling was scheduled to begin, the landowner hired a water well driller and sunk a well in the new location. With less than 200 feet between the water well and the proposed gas well, the landowner thought the gas company would be prohibited from drilling.
"What struck me in that case is that the surface owner readily admitted that they drilled the well for the sole purpose of defeating the oil and gas well and their argument was it did not matter what their motives were, the statute said what the statute said," said Steve Silverman, an attorney with Babst Calland who represented the Baron Group before the state Environmental Hearing Board.
Perhaps more striking was that the landowner in that case was Tenaska, a Nebraska-based energy company that drills for oil and gas and had plans for a natural gas-fired power plant in South Huntingdon.
The Environmental Hearing Board judge didn't address the issue of motive. Instead, because the Baron Group drilled its oil and gas well before Tenaska had a chance to connect its water well to the trailer, the Baron Group got the legal advantage. Tenaska was ordered to plug its water well.
This was the first and only time that a case involving the water well gambit had come before the state Environmental Hearing Board, according to its chief justice. The issue isn't as developed in Pennsylvania courts as in West Virginia, but it's starting to show up in other legal documents across the Marcellus footprint.
About six months ago, Steve Townsend, a Pittsburgh-based landowners' attorney, began to notice a new clause in leases proposed to his clients. It was a promise that the landowner wouldn't build anything within 200 feet of what's already on the property.
"Anytime that something is bad for the industry, they just remedy it by putting it into the lease," Mr. Townsend said.homepage - businessnews - marcellusshale
Anya Litvak: email@example.com or 412-263-1455. First Published October 12, 2013 8:00 PM